Tax time has rolled around in the United States, running from January 27 to April 15. With over 140 million tax returns expected, homeowners have a golden opportunity to use tax breaks to boost their refunds.
Owning a home is costly, and it pays to know how you can ease that financial burden through the IRS's offered tax benefits. These perks, including deductions and credits, can shave off a good amount from what you owe in taxes.
While many of us are aware of deductions for mortgage interest, there are other homeowner benefits that often fly under the radar.
Main Tax Deductions for Homeowners:
For most homeowners, tax benefits come in the form of deductions – these lower your taxable income, which means you pay less in taxes. You have a choice between taking a standard deduction (which in the current tax year is $14,600 for single filers, $29,200 for married couples filing jointly, and $21,900 for heads of household) or opting for itemized deductions.
Itemized deductions could include things like mortgage interest, state taxes, and donations to charity.
If you're looking to claim deductions meant for homeowners, you'll need to itemize using Schedule A of your Form 1040.
Whether you go this route depends on if your itemized deductions are more than the standard deduction offered. Unlike deductions, tax credits reduce the tax you owe dollar for dollar and are available regardless of whether you itemize.
Mortgage Points Deduction:
When buying a house, you might have the option to buy discount points to lower your mortgage rate. Typically, each point you buy reduces your rate by 0.25%, depending on your lender.
These points are prepaid interest, so you can deduct them. The cost of these points is deductible as mortgage interest on Line 8 of Schedule A, Form 1040.
Check out: New First-Time Home Buyer Tax Credit Proposal Aims to Help Prospective Homeowners
Tips for Maximizing Tax Savings:
Tax benefits like mortgage interest deductions, tax credits, and discount points can lighten homeowners' financial loads. Checking all the options and understanding what you qualify for can help ensure you maximize your tax refund before the deadline on April 15.
Remember, delving into the specifics of these tax breaks and how you can apply them can make a significant difference in your tax returns.
If necessary, consider consulting with a tax professional to guide you through maximizing your tax savings as a homeowner.
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